Expert's View

While the population of CSRS-covered employees has dwindled to about a tenth of the workforce, the fact that most of them are eligible to retire makes it especially important that they know what can happen if they don’t make a deposit to get credit for any active duty service in the military. Let me explain.

If you served on active duty after December 31, 1956, and were first employed under CSRS before October 1, 1982, you have a choice. You can either make a deposit to get credit for your active duty service or not make it. Either way, you’ll get credit for that time in determining your total years of CSRS service. However, if you don’t make the deposit, retire before age 62, and are eligible for a Social Security benefit at age 62, those years of service will be deducted and your annuity recomputed without them. If you retire after age 62, the reduction will take place on the day you retire.

On the other hand, if you won’t be eligible for a Social Security benefit at either point in time, you don’t need to make a deposit because nothing will happen to your annuity. OPM only checks once.

If you were first hired under CSRS after September 30, 1982, you’ll only receive credit for any post-1956 military service if you make a deposit to the retirement system.

So how much would you need to deposit? A percentage of the basic pay you received for your active-duty service (not including differentials and allowances), plus accrued interest. For service prior to January 1, 1999 and after January 1, 2001 the deposit is 7 percent. For periods of service performed during 1999, it’s 7.25 percent, and during 2000 7.40 percent. The percentages are a one half-percent higher for special category employees, such as law enforcement officers, firefighters and air traffic controllers.

Interest is added to the deposit unless you made it within two years of the date on which you were first employed under CSRS. Before Jan. 1, 1984, the interest rate was 3 percent; after that, a variable interest rate has been charged. Here’s the full list

1985 – 13% 2000 – 5.875%

1986 – 11.125% 2001 – 6.375%

1987 – 9% 2002 – 5.5%

1988 – 8.375% 2003 – 5%

1989 – 9.125% 2004 – 3.875%

1990 – 8.75% 2005 – 4.375%

1991 – 8.625% 2006 – 4.125%

1992 – 8.125% 2007 – 4.875%

1993 – 7.125% 2008 – 4.75%

1994 – 7% 2009 – 3.875%

1996 – 6.875% 2010 – 3.125%

1997 – 6.875% 2011 – 2.75%

1998 – 6.75% 2012 – 2.25%

1999 – 5.75% 2013 – 1.625

As you can see, the longer you wait to make a deposit, the more you’ll have to pay. It’s not uncommon for someone to end up paying more in interest than the amount originally owed. Even a small bill can mushroom into a large one.

Fortunately, you don’t have to make that deposit in a lump sum. You can make it in payments as small $50. However, you’ll have to complete the deposit before you retire.

If you are a CSRS employee who had any post-1956 active duty service, know (or think) you’ll be retired and eligible for a Social Security benefit at age 62 (or when you retire if it’s after age 62), and haven’t made a deposit, here’s what you need to do.

Complete Retirement Form RI 20-97, Estimated Earnings During Military Service, and mail it to the military finance center for your branch of service, along with a copy of your DD 214, Report of Transfer or Discharge. The finance center will send you an official statement of your earnings. Take that, a copy of your DD 214 and a Standard Form 2803 to your local payroll office and ask them to figure out how much you owe, including accrued interest. If you decide to make the deposit, you can arrange that with them. Note: You can download the RI and Standard Form at www,opm.gov, click on Forms.